Question: On June 30, 2010, Lomond, Inc. issued twenty $10,000, 7% bonds at par. Each bond was convertible into 200 shares of common stock. On January

On June 30, 2010, Lomond, Inc. issued twenty $10,000, 7% bonds at par. Each bond was convertible into 200 shares of common stock. On January 1, 2011, 10,000 shares of common stock were outstanding. The bondholders converted all the bonds on July 1, 2011. The following amounts were reported in Lomond’s income statement for the year ended December 31, 2011:

Revenues $977,000 Operating expenses 920,000 Interest on bonds 7,000 Income before income tax 50,000 Income tax at 30% 15,000 Net income $ 35,000 What is Lomond’s 2011 diluted earnings per share?

a. $2.50

b. $2.85

c. $2.92

d. $3.50

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